Competitive Pay: What You Need to Know
Offering competitive pay is an important part of companies finding employees who can best help them meet their objectives. In a saturated job market, it is often necessary for employers to offer competitive salaries to attract qualified candidates. If you are searching for a job or considering changing careers, you will want to understand how to evaluate and take advantage of competitive pay rates. In this article, we define competitive pay, look at the factors that affect it and discuss how to effectively negotiate a competitive salary.
What is competitive pay?
Competitive pay is a term that refers to an employer offering a salary that is equal to or exceeds the industry standard for similar jobs in the same geographical area. The word "competitive" relates to employers using their salary rates to compete with other companies to secure high-quality employees. You are likely to see this term included in job listings and online job boards as a selling point. Employers who offer competitive pay are often willing to negotiate a salary if it means hiring a more qualified employee.
In today's job market, competitive pay includes more than just the rate of your base salary. "Base salary" refers to the salary that you agree to when you sign your employee contract. Base pay does not include bonuses, benefits or potential pay increases. Some employers who cannot offer base pay at a competitive rate instead offer competitive options for benefits packages, additional PTO or flexible work hours.
Read more: Base Pay and Your Benefits Package
What affects competitive pay?
To understand and take advantage of competitive pay, you will need to do some specific research. There are several factors that affect the rates of competitive pay, and it will be helpful if you can familiarize yourself with each of them. Here is an overview of what affects competitive pay:
The city or state in which you are job searching will greatly impact the rate of competitive pay. Minimum wage and average salaries vary by state, so it is important to look at local statistics as a part of your research. Two individuals working in the exact same position will be paid differently depending on location, so you will want to consult job listings in a variety of cities to get an idea of your going rate as a professional.
The industry in which you want to work will also affect the competitive pay rate. Before applying for jobs or agreeing to an interview, make sure you research what professionals are typically paid in your chosen field. If you have not yet committed to a certain industry, you may be applying for a wide variety of positions. This can be a highly effective tactic for job searching, but you will need to research every unfamiliar job title carefully to make sure the typical salary will meet your needs.
Supply and demand
In areas where the need for a certain kind of employee is higher than the supply, your value as a potential hire could increase. If the pool of prospective employees is relatively small and you meet all the requirements for the job, you may be in a position to negotiate a salary that is higher than average. When interviewing for a job, you may be able to find out how many other candidates there are and how long the company has been searching to fill the position. These factors can certainly affect the salary the employer is willing to offer.
Level of expertise
The final factor that affects competitive pay is your level of professional expertise. This includes your skill set, your education level and your practical experience. For example, if you have a college degree and five years of industry experience, you will likely be offered a higher salary than someone with no higher education and only a year of experience. Specialized qualifications like certifications or awards will also help your value as a potential employee increase.
Read more: How To Talk About Salary in a Job Interview
How to negotiate competitive pay
Consider following these steps when negotiating a competitive pay rate:
1. Determine what you need
The first step in negotiating a competitive salary is knowing both what you want and need to earn. Create simple monthly and yearly budgets to find out how much you will need to make to live your desired lifestyle. Take into account any student debt, car payments or mortgages. After you have a number that represents your minimum requirements, research average salaries in your area. Consider how much insurance will cost and how much you will have to dedicate to your retirement savings if your employer does not provide health coverage or 401(k) matching. Armed with this information, you will be prepared to discuss salary at any point during the hiring process.
2. Be confident
When the time comes to agree on a salary, you may need to present a convincing argument. It is important to be polite at all times, but you should also be willing to stand your ground during negotiations. Use the data you have collected to show your hiring manager or employer that you have done your research and are well-informed. They might be reluctant to agree to your terms at first, but don't be afraid to ask for their patience and finish presenting all your points.
After you have outlined your requirements, the hiring manager or your employer might answer with a compromise or an outright refusal. Be prepared to handle either situation. If the compromise still meets your minimal requirements, it may be worthwhile to accept if there are opportunities for future raises and promotions within the company If the employer's proposal does not meet your requirements, you may need to pursue another position.
3. Stay informed
Even after negotiations are included, you still have reasons to stay informed on the current job market. It is often a good idea to be aware of what similar professionals are making in your industry. As time goes by, you might take on additional responsibilities, tasks or roles as a part of your job. Depending on the situation, this might qualify you to renegotiate your salary.
If your company offers opportunities to continue your education, you may acquire new skills as a part of training courses, achieving certification or even pursuing a new degree. Completing these goals may also give you cause to meet with a manager and discuss earning a more competitive salary. You can use tools like Indeed Salaries to get current information about pay rates in your industry.
Understanding competitive pay rates can benefit you significantly in your job search. Before you meet with a hiring manager or potential employer, it is important to be aware of how much you are worth as a professional. Conducting research, using your negotiation skills and staying informed can help you secure the salary you need and deserve.
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